MILAN — At least a few companies are bucking the tough retail environment — and Yoox Net-a-porter Group is one of them.
YNAP saw adjusted net profits leap 15.2 percent in the first half to 37 million euros, or $41.4 million, compared with pro-forma adjusted net profits of 32.1 million euros, or $37.5 million, in the same period last year.
First-half revenues also rose double-digits, climbing 13.3 percent to 897 million euros, or $1 billion, compared with pro-forma revenues of 791.8 million euros, or $926.4 million, in the first half of 2015.
And the momentum built throughout the period — and is expected to continue in the second half.
“Yoox Net-a-porter’s growth has accelerated, reaching the high-teens in the second quarter, despite the mixed economic environment,” said chief executive officer Federico Marchetti. “The positive momentum maintained across all our business lines demonstrates the strength of our model and its significant potential for further profitable development.”
In the six months ended June 30, adjusted earnings before interest, taxes, depreciation and amortization grew 15.2 percent to 76.5 million euros, or $85.6 million.
The growth was fueled by the core in-season designer business, which includes Net-a-porter, Mr Porter, Porter, Thecorner and Shoescribe. Revenues on those sites accelerated in the second quarter despite increasingly tough comparatives and a slowdown in growth at Thecorner and Shoescribe following the reduction of marketing investments ahead of the discontinuation of the two e-stores in the third quarter. The strong quarter led to a 10.5 percent gain in revenues to 490.1 million euros, or $549 million, in the first half.
Prada, Tiffany, Moncler (in August) and Ermenegildo Zegna joined the in-season business line, and capsule collections from Gucci, Dolce & Gabbana, Chloé and Oscar de la Renta all launched in the second quarter, as well as Aspesi and Moncler Gamme Bleu. As of June 30, the multibrand in-season business line accounted for 54.6 percent of group sales.
During a conference call with analysts, responding to a question about these high-profile brands, Silvia Scagnelli, corporate development and investor relations director, said “the focus is on brands that have longer online sales potential — digitally ambitious brands, not necessarily the biggest brands.” She admitted it was important to include prestige brands such as Prada and Tiffany, which are “very appealing to high-spending consumers.”
The multibrand, off-season business line, which includes Yoox and The Outnet, registered sales of 318.3 million euros, or $356.5 million, up 18.6 percent compared with last year, and accounting for 35.5 percent of the total. The Outnet introduced Golden Goose and Proenza Schouler handbags.
The online flagship’s business line achieved sales of 88.7 million euros, or $99.3 million, a 10.8 percent gain and accounting for 9.9 percent of the total. The new online Chloé store was launched in June in Europe, the U.S. and in the Asia-Pacific region, including China.
Sales in Italy rose 19 percent to 57.5 million euros, or $64.4 million, with a positive growth in the U.K. in the second quarter. In that country, sales grew 14.3 percent at constant exchange rates and 5.1 percent at current exchange rates to 70.2 million euros, or 78.6 million, despite the slowdown seen over the last two weeks of June, around the dates of the Brexit referendum. In the first half of this year, sales in the U.K. totaled 135.2 million euros, or $151.4 million, up 15.4 percent at constant exchange and 8.6 percent at current exchange.
“In the U.K., the second half of June was flat, while the region was performing well before. July was off to a slow start but is progressing back to normal, it’s not flat and growing. Europe is back to normal, the U.K. is not there yet, but improving,” said chief financial and corporate officer Enrico Cavatorta.
Europe, excluding Italy and the U.K., accelerated in the second quarter, thanks to the strong performance of France, Germany, Spain and Russia, leading to first-half revenues of 238.4 million euros, or $267 million, rising 14.3 percent.
North America grew by 12.5 percent at constant and current exchange rates to 268.1 million euros, or $300.2 million, reflecting a very tough comparison base in the first half (up 24.9 percent at constant and 53 percent at current exchange rates). The region was affected by “heavy competition from department stores, which increased their markdown with higher percentages and anticipating timing. Net-a-porter and Mr Porter did not follow this strategy. Softer sales reflect a gross margin that increased in the semester,” said Cavatorta. This is also part of preserving the relations with the brand, said Scagnelli.
The rest of the world, driven by the “excellent performance” of the Middle East, grew 13 percent to 60.4 million euros, or $67.6 million.
Cavatorta said headwinds from foreign exchanges deteriorated in the second quarter compared with the first quarter. There were severe headwinds, the British pound was 8 percent weaker and the Russian ruble 22 percent weaker in the second quarter compared with a year ago, he said.
In the first half, the group continued to invest in its technology and operations and capital expenditure amounted to 48.1 million euros, or $ 53.8 million, compared to pro-forma capex of 46.9 million euros, or $54.8 million, in the same period of the previous year.
In particular, over the period, the group prepared for the rollout of the new Order Management System on the former Yoox Group, with the successful migration of the first online store. The transition of all the former Yoox Group’s online stores to the new OMS is fully on track for completion in the fourth quarter of this year. The new OMS will allow for seamless inventory integration between YNAP and its brand partners’ retail stores.
The first half of 2016 also saw the kick-off of the construction works for the new in-season warehouse which will be located in Italy and is expected to become fully operational in 2018.
As of June 30, the group’s net financial position was positive at 138.8 million euros, or $155.4 million, compared with a positive net financial position of 62.1 million euros, or $72.6 million, at the end of December. The increase in cash in the first half of was mainly attributable to the 100 million euros, or $112 million, in equity capital raise subscribed for by Alabbar Enterprises in April, which funded the higher ordinary net working capital and the capital expenditure invested in innovation and the convergence to a shared global platform.
In July, the A|X Armani Exchange brand was launched in North America as an extension of the existing partnership with Armani.
Cavatorta said he was not changing the group’s revenue guidance — a high-teen growth at constant foreign exchange rates. “We are not exactly there, but we expect an acceleration in the second half.”
Dollar figures were converted from the euros at average exchange rates for the periods to which they refer.